A version of this commentary appeared in the May/June 2001 issue of Innovation Briefs, a publication of the Urban Mobility Corporation.

Congestion pricing is inevitable

Anthony Downs is a prominent economist and an expert on traffic congestion. In his excellent book, Stuck in Traffic, he surveys the entire range of possible solutions, and concludes that congestion pricing is the only one that can work.

That's why it's so surprising that Mr. Downs has been giving speeches recently claiming that congestion is "here to stay" [Innovation Briefs, Jan/Feb 2001]. It's not that he's recanting the economic theory behind road pricing; he just seems to think that the American public will never accept it, so we should all find ourselves an attractive traveling companion, buy some high-tech car toys, and learn to treat traffic delay as a "leisure activity."

I have nothing against attractive carpoolers, but the fact is, public support for road pricing reform has never been higher. Congestion pricing has already arrived, and it's here to stay.

The trend started when the Dallas North Tollway opened in 1989, utilizing electronic tolling (ET) technology to collect tolls. This allowed motorists to avoid the dreaded tollgates, thereby eliminating one of the causes of congestion.

The Oklahoma Turnpike followed suit by implementing system-wide ET in 1990. They still allowed for a few manual tollgates, but those users who purchased transponders received a price discount. While this type of differential toll pricing is not the classic definition of "congestion pricing" (since the discount is not time-sensitive), it did at least introduce thousands of motorists to the concept of variable toll rates, and it did reduce congestion.

The federal government weighed in on the side of congestion pricing with the passage of the Intermodal Surface Transportation Efficiency Act of 1991. Section 1012(b) of that statute created the Congestion Pricing Pilot Program, for the purpose of testing and evaluating the potential of congestion pricing. Funding was provided by Congress to support pilot tests and feasibility studies of road pricing by State and local governments and other public authorities. In subsequent years, pre-project studies were conducted in 7 cities including Minneapolis, Chicago, and Portland.

Momentum for electronic tolling picked up in 1993 when a consortium of 5 tolling authorities in Delaware, New Jersey and New York agreed to begin implementing electronic road pricing with compatible technology that would allow motorists to travel seamlessly from one turnpike system to another. The consortium now has more than 4 million tolltags in circulation, usable on such major facilities as the Delaware Turnpike, the Garden State Parkway, and the New Jersey Turnpike. Motorists enjoy the ease of payment that ET allows, and consortium customer service representatives are opening an average of 1,700 new customer accounts per day.

The next major advance came in 1995 when SR 91 Express opened in Orange County, CA. This is a privately built, privately operated tollway built on the median strip of SR 91. It's a 10-mile expressway that uses ET to collect variable user fees. There are 14 separate price blocks, ranging from $ .75 at the off-peak to $4.25 at the peak.

Originally carpools of 3+ got to use the facility for free, while all others paid a variable toll. Thus, it became known as a HOT lane or High-Occupancy/Toll lane. Subsequently tolls were imposed on all vehicles, but HOVs still get a discount.

Contrary to some predictions that these would become "Lexus lanes", motorists from all income brackets regularly use the facility, and report high levels of satisfaction due to the time savings (up to 20 minutes each way) and predictability of the drive.

The San Diego Association of Governments (SANDAG) took congestion pricing one step further when it implemented the world's first "dynamic pricing" lanes on March 30, 1998. SANDAG officials recognized that a primary reason for the success of SR 91 express was that the variable pricing had been implemented on new lanes so that motorists still had a choice between priced and unpriced travel. Instead of building four new lanes, however, SANDAG took two under-utilized HOV lanes of the 10-lane I-15, and converted them to reversible HOT lanes.

However, unlike SR 91, the published rates - varying from $.75 to $4.00 - are the minimum rates, not necessarily the actual rates. The HOT lane operators monitor traffic and regularly re-calculate the tolls necessary to maintain free-flow conditions, based on computer algorithms. The actual charges are posted on roadside electronic message boards, and have gone as high as $8.00 during times of heavy congestion. HOVs with 2 or more passengers drive for free.

Because the rates are re-calculated every 6 minutes-thus the moniker dynamic pricing-this is arguably the purest form of congestion pricing possible.

HOT lanes have now become widely accepted in the industry, thanks to the success of these projects. According to a recent report by the Reason Public Policy Institute, consumer demand is growing, and HOT lanes are "on the drawing board, in process, or operational in some 20 locations in 9 states."

The most recent development in road pricing came on January 25, 2001 when the Port Authority of New York and New Jersey (PANYNJ) approved a plan for the use of peak-period pricing on PANYNJ bridges and tunnels. The facilities covered by the PANYNJ policy include the George Washington Bridge, the Lincoln and Holland Tunnels, and three bridges on Staten Island - the Goethals, the Bayonne and the Outerbrige. The new toll rates went into effect at 3:00 a.m. on March 25.

The price differentials encourage the use of ET and off-peak driving. For example, on the George Washington Bridge, automobile tolls are $6.00 at all times for cash transactions, $5.00 for ET during peak periods, and off-peak electronic tolls of $4.00.

Trucks will pay $6.00 per axle in cash (all times), $6.00 per axle ET at the peak, $5.00 ET during the off-peak, and $3.50 per axle ET from midnight to 6:00 a.m.

This is the kind of breakthrough that road pricing advocates have been waiting for, because the PANYNJ is the second largest grossing toll agency in the United States, and its flagship facility - the George Washington Bridge, connecting northern Manhattan Island to north Jersey and the New Jersey Turnpike - has the highest traffic volume of any bridge in the world.

More importantly, the PANYNJ proposal is getting unprecedented editorial support in the press. Tollroads Newsletter reported the following media responses: New York Times: "the plan's embrace of congestion pricing is most heartening…Access to the Holland Tunnel is a scarce resource at 8:30 in the morning and should not be priced the same at midnight."

The Newark Star-Ledger opined: "Varying the price by time of day is a promising and legitimate strategy to help reduce congestion, since we can't build an infinite number of new bridges and tunnels."

And the Staten Island Advance noted that, "Perhaps the most intriguing aspect of the authority's toll restructuring plan is that it will incorporate sizeable off-peak discounts as an incentive to keep cars and trucks off its bridges and tunnels during the peak-use hours."

The strong media response in support of congestion pricing is the key variable that seems to have been under-estimated by Anthony Downs. For decades, politicians who suggested congestion pricing were pilloried by hostile news reporters and editorial writers, and those reactions shaped public opinion against pricing reform. But all of that is changing.

The "final frontier" of road pricing will be Interstate highways and other non-tolled roads such as local arterials, where the introduction of congestion pricing will require some form of gas tax rebate in order to become politically palatable. This will be a significant political challenge, but the coming crisis in gas tax revenue collection will make the conversion inevitable. The steady rise in motor vehicle fuel economy during the past decade has allowed motorists to pay less and less in user fees for each mile they drive. This trend will continue because super-efficient hybrid electric vehicles are already available commercially, and fuel cell powered cars are likely to be available by 2004. As those vehicles begin to penetrate the market, highway authorities will be forced to consider concepts such as electronic tolling and congestion pricing as substitutes for gas taxes, simply to maintain the revenues necessary for basic operations and maintenance.

Fortunately, federal policy is once again encouraging this conversion. The Transportation Equity Act for the 21st Century creates the Interstate Reconstruction and Rehabilitation Program, which authorizes the Secretary of Transportation to select up to three pilot projects under which states will be permitted to convert reconstructed or rehabilitated free Interstate segments into tollways. This will encourage innovative state highway managers to begin making the break from fuel taxes to variable tolls.

TEA-21 also continues the congestion pricing (now re-named Value Pricing) pilot program, and authorizes up to $51 million in fiscal years 1999 through 2003 to support the implementation of up to 15 value pricing projects.

Given the widespread interest among tolling authorities in ET, it's likely that sometime within the next 10 years, the last manual tollbooth in America will be carted off to a tollgate museum, and electronic fee collection will become ubiquitous on limited-access highways. This in turn will lead to greater public support for congestion pricing.

There will always be some value in having compatible carpoolers, but in the future the primary purpose of a commuting passenger will be to share the costs (and benefits) of peak-period pricing, not to relieve the boredom of being stuck in traffic.